My father is not an investor or “bank guy” by any means. But thinking back upon childhood and beyond, I realize that a good amount of the things that are important to investing, are the same simple life lessons my father tried to instil in me when I was young.

They are tidbits of wisdom that seem to have limitless application. Here’s a few that come to mind:

Use the right tool for the right job

Whenever my dad caught me trying to hammer something with the handle of a screwdriver, or unscrew something with a butter knife, he used to stop me and tell me to use the right tool for the right job. Taking the 30 seconds to grab a hammer was far better than breaking the screwdriver and being out the time and money that it would take to replace.

The same can be said about investing. We have a variety of products we can choose from, and several of them have their specific purpose. Use a TFSA if you want to save up for a car, not your RRSP. Use an RESP to save for your child’s education, not your un-registered account. There are benefits to using the right tool for the right job, and penalties for not.

knife for the peanut butter, spoon for the jam

I think this advice was brought to the both of us from either the Flintstones or Sesame Street, but my dad would repeat the jingle if we were going to make a peanut butter and jam sandwich. It’s a simple life lesson: be cleanly and organized.

If you are in the fortunate position to have “extra” cash to play with, or if you “have a hunch” that a stock is going to move, hey, more power to you. Take the plunge, if you see fit. But don’t get your ultra-risky speculations mixed up with your legitimate investments that should be the foundation of your savings.

Simply put, don’t take the money you are planning to use for a down-payment on a house and put it all in the latest IPO. If you can take a gamble, set up a separate account and keep only a small portion of your wealth there.

More importantly, it is linked to the “use the right tool” section above: It is important to keep certain accounts separate, even if you don’t invest in individual stocks. We need to remember time horizons when investing, and use the appropriate vehicle.

Do it right the first time

Nothing upset my father more than when he asked me to do something and I did it half-heartedly. Inevitably, he would make me re-do it. It taught me to put the effort into getting it right the first time.

This doesn’t always work with investing; we all make a bad decision from time to time. But if you can make the effort to make sound decisions, you won’t have to try to make up lost ground in the future.

Creating an investing plan for yourself, deciding an asset allocation, and following the plan is far more important that finding the next Microsoft. The fact of the matter is that most of us will never find the next Microsoft early enough, nor would we sell it when it should be sold. But following an asset allocation plan is something that we all can do… easily.

Keep your head up

This was a hockey lesson. I remember forgetting this advice once, and skating full speed into another kid behind the net. My tailbone hurt for a week.

If you are a do-it-yourself investor, then you will have to keep on top of things, especially if you are investing in individual stocks. Buy and hold is a legitimate strategy, and one that I tend to follow. But if you are not reading up on your companies, then you may be left holding some useless Enron stock, which may hurt more than your tailbone.

For indexers, it is important to keep marginally informed, and take care of re-balancing when your holdings get out of whack by a decided percentage, or at decided intervals.

Another day another dollar

More than advice, this is something he would say (still says to this day, in fact) when he got home from work and I would ask how his day went.

I’ve said in another post that I view my human capital as my most important asset, and it really stems from this saying. As long as you can keep working, you can keep earning, which means you can keep saving. It also means that you can spend when you need to, knowing that you have this powerful asset in your portfolio.

I prefer Steve Martin’s version, though: “All I’ve ever wanted was an honest week’s pay for an honest day’s work.”

Do as I say, not as I do

Probably the most frustrating to have to hear, but one of my favourites now, I would get this line thrown at me when I caught him in some sort of seemingly questionable situation where he told me one thing, but wasn’t following his own advice.

This is as important in investing as it is in life. There is a lot of good advice and wisdom out there from several people who know a lot more than you or me. It doesn’t mean that we need to do exactly what they are doing, especially when scale is an issue.

Warren Buffet is very good at recognizing value in stocks and whole companies. But he has said that the majority of investors would be better off by buying a basket of index funds.

Check your base

Living on a farm, ladders were constantly in use. Whether it be for changing light bulbs, painting barn doors, re-shingling the roof, cleaning the eaves or picking cherries, we were always up on them. No matter how many times I would climb the ladder,  he used to always tell me to check the footing before climbing, and then again on the first rung or so.

A solid base to a portfolio should be able to avoid (or lessen) the impact of a hard fall from market heights. This helped me when the market was approaching 15,000 (I put the brakes on at about 14 and change in June of 2007). The ladder started to feel wobbly, so I stopped climbing, re-checked my base, stockpiled cash, and had a nice cushion to fall on.

If the ladder starts to feel unstable, check the base, or grab another ladder. High stock prices may offer a great time to move some money into bonds, for example.

Don’t waste Your Money

Kids always go through phases and fads. Often these fads cost money. Whether it is video games, rap music, Pokemon cards or BMX bikes, the truth is that most of these things will be forgotten 10 years out.

My father’s words (and disappointed eyes when I wasted my money on something foolish) have had a lasting impression. I don’t often buy shiny things, and save a very healthy portion of my income.

Put your things away

Whether it was my toys when I was little, tools on the farm, or the jars and packages after making a sandwich, my father always insisted that I put things away when I was finished with them.

Not exactly investing, this mentality has left me with a very organized system for recording income, expenses investments, dividends etc. Good accounting practices are very helpful come tax season.

I’m sure there are several more of these little gems that can be found. Feel free to add some in the comment section.

It was an enjoyable job which sparked an interest, and to this day I still follow the world of wines, though to a much lesser degree. A bit of news that I came across a couple of months ago really annoyed me, however.

Two wine companies are in a legal battle about the naming of their wines, and it is those names that irk me. One is called “Mommyjuice,” while the other is called “Mommy’s Time Out.”

I’m not denying that this is a key demographic. In fact, wineries across the board have realized that women 25 – 40 are target consumers, and this is why there has been a proliferation of reasonably priced wines with cute or stylish labels. Yellow Tail (a brand of Casella Wines) became an instant success with it’s artful wallaby, Vincor (itself a subsidiary of Constellation Brands) came up with Kumala, and Peller Estates created an entire subsidiary in Roundpetal to produce XOXO, Croc Crossing and others… all  to market to women.

I’m all in favour of the above. I think it is in a business’s best interest to locate potential buyers and market to them. Businesses that fail to do so alienate huge swaths of the populace.

My beef, however, is with the flagrant implications that “Mommyjuice” and “Mommy’s Time Out” create.

While being a stay-at-home mom is certainly a difficult and sometimes stressful job, and I take no issue with a parent enjoying a glass of wine at the end of the day, I find the implication that alcohol is the answer to be in poor taste. It is entirely possible to market to this demographic without the suggestion that the need for alcohol is in direct relation to their children.

In wine tasting lingo, a dirty wine is one that is poorly made, that gives off a foul or pungent smell. I define dirty marketing as much the same.

Disclaimer: I own shares in one of the companies mentioned in this post. I post the link not as a recommendation, but rather so readers can see what the bottles look like.

I’m usually pretty much on the ball when it comes to our finances. But recently I had a slip-up that cost us 50% in fees.

We have most of our Canadian financial assets with one financial institution, which are spread over a number of accounts. The bulk of our cash savings are sitting in a high-interest account with the bank. I’ve also had my main credit card at that bank for about 13 years.

I have never had any problems transferring money or paying off my credit card because there are no fees to worry about when moving money from one account to another within the bank.

I applied for a new credit card in January with another financial institution, however, and recently set it up to make a monthly donation to a charity. When my first bill came in, I went online, set up a new payee, and paid off my credit card… all $10.00 of it… from our high-interest account. I checked my new card a few days later to confirm that the payment went through, and thought nothing more about it.

Last week I was going over my April transactions and noticed that right after my $10.00 credit card payment, there was a $5.00 service fee for a payment to an outside account.

Ouch!

Okay, I admit that 50% sounds worse than $5.00,  but it’s still a hard pill to swallow.

On one hand, I want to leave it as-is, as a bit of self-punishment; a 50% stupidity fee, of sort (I long ago read and knew about the fee, I had simply forgotten). More likely, however, I will call the bank and ask them to reverse the charge.

Hopefully they will allow me to leverage my very long history with them against my very recent stupidity.

The keynote speaker raved about how gold was foolishly cheap, and should  have been twice the price that it was. It was an interesting talk, and had I listened to that geologist, I would have made out all right (not accounting for inflation or exchange rates). Take a look at this. It was 1999, and gold was about $250 an ounce.

I have never pretended to understand our infatuation with gold. I understand it now to be another currency, yes, but what makes it desirable?

Gold has a long history of being something we associate with wealth. Empires in Mexico, India, Europe and others… they have all sought after it. It’s history is nearly as interesting as that of salt.

To tell you the truth, I don’t even like gold really. Sure, I would like to own a bar to use as a doorstop or a wafer to use as a paperweight, but that would just be to be eccentric. Gold jewelery has always seemed Gaudy to me. My wife’s engagement ring, and our wedding bands are platinum. Simple. Stylish. Hard.

Yet gold keeps moving higher, and recently some things have happened that make me wonder if it’s possibly on its way back down.

I’ve lived here in Japan for 9 years, and starting last year a commercial started running that made me cringe. The commercial is selling a class and system to trade and make money from gold. The people in the commercial look very happy after walking out of the class, and then it cuts to them in front of a computer screen in their living room, smiling as they (I assume) buy and sell gold futures.

(This seems to have replaced a similar commercial that used to run, which promised to teach you how to make money in the F/X market.)

But the real reason I will continue to stay away from gold  came last evening when a door-to-door gold buyer showed up at my door.

He was wearing a yellow jacket, and asked if I had any gold I wanted to sell. I said no, and he took a step to try to stop me from closing the door. He showed me a flier with various examples of gold jewelry and asked “Don’t you have anything like this that you want to sell?” I said no, and he asked again if I didn’t have anything like it in the house, to which I answered “I’m poor. I have no jewelry.”

Aside from the fact that I wouldn’t tell a complete stranger if I had jewelry in the house or not, the concept of door-to-door gold buying floored me. Has it come to the frenzy that pawn shops are willing to send a workforce out into the community in search of gold?

That tells me something. It tells me that pawn shops believe that gold will continue to increase, so they are willing to go out to buy gold at today’s price with the expectation that they will be able to sell it even higher next week or next month.

And that tells me something else. If there are commercials advertising how you can make money in gold, and pawn shop dealers showing up at my door, well, to me that’s about the same as a shoe-shine boy telling me to buy stocks. It’s advice that stinks, and will leave you with a headache if you stick around too long.

Epicentre to my place: 1075km

I’d like to say thank you to all who have emailed to make sure that my family and I are safe. I thank you. We appreciate it a lot. Luckily, the quake had no direct effect on us, as we live a good thousand kilometres from the location of the quake, tsunami, and reactor. To put that distance in a Canadian context, it’s about the same as a flight from Toronto to Fredericton.

To be sure, it was a massive quake, and caused a remarkable amount of damage. As terrible an event as it was, however, I have to say that it probably would have been several times worse had this event happened in any other country. The Japanese quake predictor system sent out a message one minute before the main quake, and I can only assume that that helped many people prepare even slightly. Architecture in Japan is also designed with earthquakes in mind. And while the old wooden structures of Sendai were no match for the tsunami, all the buildings of Tokyo held up exceptionally well.

Beyond this technology, though, is the sheer calm of the Japanese people. It was remarkable to watch the events on TV of people walking calmly to shelters, or waiting patiently for the few buses that were running. No rioting, no looting, no fighting for places. A true testament of oneness… we are all in the together.

The Canadian Embassy has done a great job of sending out emails regarding the quake, evacuation and reactor to those of us registered, but I found this article a little surprising and disheartening. It estimates that there are about 12,000 Canadians in Japan, yet only 1773 are registered with the embassy. I registered when I first moved here, and can’t recommend it enough. If you live abroad and haven’t done so already, here is the link to register.

Again, thanks for your thoughts everyone.

My return has been filled out the same way for years, and there had never been a problem until last year, when they kept my 2009 return for review. They agreed with my return, but said any return could be re-reviewed at any time.

They took themselves up on that offer by sending me a letter in January saying that my 2007, 2008, and 2009 returns were under review.  After complying with their request for information, my returns have been left as they were (which is a relief) but at least this time I think I know what was setting off the CRA’s alarm.

I submit my statements of earnings from my Japanese sources with my return. I also submit a legend that tells the CRA what each box means (income, pension payments, taxes paid, insurance premiums paid etc.) as well as receipts for local taxes paid,  but I had never thought about translating the addresses of my various employers. This seems to have been the rub, as their January letter specifically asked for the translation and telephone numbers of my sources of income, as well as a description of how the income was earned.

I submitted the information within the 20 days given to me, and they wrote back saying that since I sent in that information, no adjustments would be made to my returns, and that everything looked to have been filed correctly.

As I prepare my documents for my 2010 return, you can be sure I will have an extra page inserted with my forms giving the addresses in the Roman alphabet, the phone numbers and a brief description of how I earn my money. Regardless of how right you think you are, it can’t stop the feeling you feel when you receive a letter from the CRA.

Related Posts:

1. The Audit: Part I
2. The Audit: Part II

The rapport I have with the majority of my contacts is worth more than gold to me. I have written about the benefits of knowing my mechanic and jeweller before, and the same goes for knowing my barber, financial planner, and, until three years ago, my travel agent.

Three years ago my travel agent was transferred to a foreign branch. Since then I have struggled to find someone I can trust with my travel plans. The agent that was assigned my file promptly drew my wrath as she failed to book my requested tickets for 6 people. Her company lost out on about $8000 of business, and we were forced to pay a higher price at another company, as the early booking prices were no longer available.  

While my old travel agent understood my preferences and requirements for travelling, and always knocked off a few hundred bucks through “preferred customer” discounts, I can’t help but feel that I am merely dealing with commission based sales people now.

I met one the other day when I was trying to find out prices for July. I sat down prepared to give all information and then set her loose on the computer, but she starting tapping away as soon as I opened my mouth. “Well, at least I’ll hear several options,” I thought. Within one minute she piped up that she can book me on a flight, and the price is just shy of $2000.

That’s a ridiculously high price for such an advance ticket, and sure enough, it was Air Canada. I asked her to give me a quote for Korean Air flying through Inchon, which was apparently a very difficult question, as it took her 20 minute to search through the database, talk with her supervisor, and make a phone call.

Finally she gave me the quote I wanted to hear (about $1200), but said I couldn’t book the flight because it was too early. Hilarious.

With that kind of service, I’ll once again be searching for a new agent.

Starting this past January, however, that first post of mine has seen a massive spike in traffic generated from search engines, as people think about making their RRSP contributions. I thought I would repost for those thinking of getting a start on this coming year’s contributions. Remember, by contributing earlier in the year, you have more time to compound your money on a tax deferred basis.

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If you have a Royal Bank or National Bank of Canada credit card that accumulates points, you can redeem those points for much more than a new desk lamp.

While certain TD, Scotia, BMO and CIBC cards give “cash back” credit of 0.25% – 2% of your yearly spending, RBC and National Bank of Canada encourage saving and lowering debt with their point system by allowing those points to be redeemed for “financial rewards” coupons.

At RBC points can be redeemed for vouchers that can then be deposited into your Royal Bank RRSP, TFSA, or RESP account. If you hold your mortgage or line of credit with the bank, you could also apply your points to the principal of those loans.

Redemptions start at 12,000 points for a $100 voucher, and move in increments of $25 per 3000 points. At these numbers, and assuming 1 point per dollar charged, it works out to a bonus of 0.83% of your credit card spending.

National Bank of Canada cards work out to a little higher (0.91%) but have slightly different options. Like at RBC, points can be redeemed toward your National Bank RRSP or TFSA account, but they do not seem to have an RESP option.

Points can also be used to pay down your mortgage or other loans held at National Bank, and if you are a Quebec resident, they can even be used for a rebate on your car or home insurance.

Redemption starts at 11,000 points for $100, and can only be redeemed in amounts of $100 (ie. 11,000 points, 22,000 points etc.)

Though it’s too late to use your points for the 2010 tax year, you can redeem anytime and get a good start on this year’s contributions.

After a few years of compound interest, I’m sure that the tax sheltered cash will be worth a lot more than the frying pan you could have had.

Related Posts:

1. Using Cash Back Cards Toward RRSPs etc.

I’ve been reading Winnie the Pooh to him, and he seems to really enjoy it. I should say he seems to enjoy the rhythm of my voice. (If there is anything I learned from 1980s movies, it came from Three Men and a Baby: “It’s not what you say, but how you say it,” or something to that effect.) I couldn’t agree more.

As I get more and more used to my new parental role, I’m also starting to find some time to read a little more online (that isn’t baby related). Here are a few interesting things I’ve come across recently:

Blogs

1. Andrew Hallam says we can learn from the mistakes the Baby Boom has made.
2. Money Smarts Blog give a good breakdown of the RRSP Home Buyers Plan.
3. Larry MacDonald says the high Canadian dollar creates a good chance to invest in the U.S. … but wonders what to buy.
4. Canadian Capitalist posts some highlights from the most recent Berkshire Hathaway annual report.
5. Invest It Wisely had a guest post about South Korea.
6. Investing Thesis has an interesting energy interview with a portfolio manager.
7. Canadian Finance Blog talks about calculating your ACB.

Articles

1. The Tokyo stock exchange, in a bid to attract young investors,  has a new mascot.
2. Perhaps feeling like they’re missing out as they watched Goldman buy into Facebook… JP Morgan is trying to buy into Twitter.
3. WSJ This Morning has a good list of jobs you should have by 30, and some lessons learned from each.

Carnivals

1. Canadian Finance Carnival
2. Canadian Personal Finance and Investing Carnival

Hope everyone has a great week!

They are talking about being rich, and Jim says he was rich once. He had 14 dollars, but lost it all speculating.

“What did you speculate in, Jim?” Huck asks.

“Well, first I tackled stock.”

“What kind of stock?”

“Why, live stock – cattle.”

Jim says he paid 10 dollars for a cow, but that it soon died. He didn’t lose everything, mind you, as he sold the carcass for $1.10.

He still had about 5 dollars left, so he invested it with a “bank”. The bank was actually just a one-legged farm hand who promised 4 dollars interest at the end of the year for every dollar invested. Jim invests 5 dollars and is promised 35 dollars in one year’s time.

Jim figures the 35 dollars is a sure thing, so in order to “keep things moving” he decides to buy a boat for 35 dollars from his friend, Bob, on credit and promises to pay in a year.

It’s unclear if Jim planned to re-sell the boat and invest the proceeds in something else or what, but it is essentially moot, as the boat was stolen that night. The next day the one-legged farm hand announced that his “bank” had gone bust, leaving the investors with nothing.

If you’re keeping track, as Huck was, you will note that Jim still had 10 cents in cash. What did he do with it? He had a dream to give the 10 cents to his friend, Ballum, to invest for him, because Ballum is said to be lucky.

Ballum takes the money and gives it to the poor because he heard a preacher say that whoever gives to the poor is bound to get his money back a hundred times over.

Of course, no money ever came back to Jim, and he was left with zero. In fact, he is 35 dollars in the hole to Bob, but nothing is mentioned about that.

It isn’t surprising that Twain would insert some commentary on investing in his books. He is well-known to be a social commenter, and was a fantastically terrible investor (he apparently lost about the equivalent of 4 million in today’s dollars by investing in a typewriter that never came to market… he had to go on a 9 year speaking tour to regain his fortune).

What is somewhat surprising is how relevant his words still are today. There are, unfortunately, countless Jims in the world making investments in sickly stock and bad banks, countless Jims misusing credit, and countless Jims giving their money to managers based on past performance.

So don’t be like Jim. You never know where you’ll end up.

Leaving the debate on altruism for another day, let’s look at the act of giving. The moment a donation is made, two of the above elements are met. We feel pride for having done something, and the government will recognize that act in the form of a reduced tax bill. The real question left unanswered, and probably the most important, is if your donation was able to help someone or not.

It is, of course, quite difficult to track your specific dollar, but there are some websites that can help to get an idea of how your donation will be used. If you give $100 to a charity, which in turn uses $30 of that for fund-raising, and another $25 to pay for administration and salaries, then you have to question if your donation was used effectively.

Charity Navigator has been a great tool for looking at American charities. It assigns a rating based on how effectively a charity uses the money it receives. There has been a lack of such a site in Canada.

While the Charities and Giving section of the CRA offers some good information, it is not necessarily easy to compare charities.

Starting last year, however, Money Sense magazine started The Charity 100, a list of the top charities in Canada. They set out criteria and graded the charities based on how effectively money was being used. It certainly isn’t as extensive as Charity Navigator, but it does offer a great starting point for Canadians trying to decide where their money will help the most.

That majority of retail investors probably use either market orders or limit orders when they buy individual stocks. Market orders are simply orders to buy* at the best available price (which is usually the currently listed price). Problems can arise, however, if the price of the stock rises between when you hit “buy” and when the order is actually filled.

By using limit orders, you state the highest price that you are willing to pay for the security (ie. you set a limit on what you will spend). This means that if the price of the stock moves up you will not be hit with a higher than anticipated purchase price. You have given instructions that clearly state that you won’t pay more than a certain price.

I have seen recommendations to set the limit order price at the current market price, or slightly above the market price (say one or two cents) to ensure that you get your shares without paying too much. This is solid advice if you are happy with the current market price, and absolutely must have those shares. Personally, I usually use limit orders to wait for a better price.

Ninety-eight percent of the time I set my limit order to below the current market price and wait out the day to see if my order is filled. This system started because I dislike paying commission, and wanted to lower my purchase price in order to cover the cost. If, for example,  I must pay $9.95 in commission and want to buy 100 shares, I would place a limit order to ten cents below the market price. If the order goes through, I would have saved $10 on the stock purchase, which would equal out the commission cost.

Gradually, however, I started lowering my limit order to reflect what I was hoping to pay.

I recently bought 300 shares of a company I like and set my limit price to 25 cents below what the stock was trading. The stock dropped later in the day and my order was placed, saving me about $65 ($75 saving minus $9.95 commission) compared to if I had merely bought at the market price earlier in the day.

Using limit orders in this way means that you sometimes need to be patient. About a year ago it took me five trading days to buy the shares of a great company. The stock never fell to my offer price over the first four days. I got lucky on the fifth day, however, as the stock dropped significantly before I had placed my limit order. Because of that, I was able to buy into that business at an even lower price than I had been prepared to pay. Thank you Mr. Market!

Unfortunately, the down side to this method is that potential upside may be missed. Another wonderful business that I wanted to own was already very cheap in December 2009. I placed my limit order to cover the commission cost, but the stock went up… and up. I placed my limit orders diligently, but finally decided to abandon the idea as it continued to climb in January, and bought close to the market price. I missed out on about a week of upside, but have enjoyed the ride since. This is a situation where I should have bought at the market price in the beginning. Not because of hindsight, but because I already knew it was cheap, and I really liked the business. I let my emotion of “commission avoidance” get in the way.

So there are some pros and cons to making a limit order below market price, but I generally feel that the pros outweigh the cons. Regardless if you set your limit price at, above or below the market price, at least you know what you are paying.

*Limit orders can be used either to buy or to sell, but the examples in this post only consider buying a security.

When I ordered my report and score this past December, I noticed that the sites of both Transunion and Equifax have become… labrynthesque, shall we say. It took me a good while to find the order forms that I was looking for, and I suspect that is because both companies want you to purchase their monthly monitoring option rather than the one time option. The monthly monitoring options were very easy to locate, by the way.

I feel most people would benefit from knowing their score on an annual or semi-annual basis, but would not suggest that the average person would need to know their credit score monthly.

• At Transunion the one-time credit profile and score page can be found here and currently costs $22.90 (down considerably from the $30.85 I paid in 2009!!) Make sure you have the box checked to obtain your score.
• At Equifax the one-time report and score can be found here and currently costs $23.95.

With both companies, you will only have online access to your score and report for one month, so it is a good idea to print out a hardcopy and save the file as a pdf.

Once you begin following your score over time, you can start to notice how your yearly activity affects your score. I rarely have hard-checks performed on my file, and pay my bill in full every month. This conservative use of credit has resulted in my score moving up about 1% per year. My score is quite high (2010 saw me improve to a score of 806 from 799 at Equifax, for example), so I think it takes more to move the needle. Someone with a lower score might see larger percentage increases after a year of good credit.

I am very interested to see my score this year, as I applied for a new credit card after I obtained my credit score… I’m looking forward to seeing where I go in 2011 as a result. I’ll have to wait until December to find out, however.

The following posts may also be of interest:

1. A Primer to Credit Scores and Reports
2. A Walk-through to Obtaining a Free Credit Report
3. Checking Your Report for Errors
4. Understanding Your Credit Report and Score (FCAC Site)

It’s been a whirlwind three months. And they’ve been a great three months.

I took an unplanned (but understandable) break from blogging for a while due to the birth of our first son. He was born in mid-December, and is doing smashingly well. The last month of my wife’s pregnancy, and the first couple months of his life have found me without much Internet time, except for answering emails from family and friends, and looking up baby info. Somehow, diapers, dishes, laundry and back massages seemed to take priority.

I would like to give a special thank you shout-out to Arjun at Investing Thesis for sending me an email making sure I wasn’t on my deathbed. I appreciate the concern.

It’s still a pretty busy schedule, but I’m starting to get into a groove of managing my business and family. As such, I think it about time to add blogging back into the routine.

Things will probably still be sporadic, but I am aiming to get about two posts per week.

The Giveaway

Aside from teaching in the public school system, I run a growing and, in my terms, successful private teaching business. My students are from all walks of life, and a good number of them are working adults. I also have company classes where I go into a boardroom to teach employees business based communication.

Having this kind of student base means that I am gifted many schedules, day planners and calendars  each January. I have my one preferred schedule that I have been using for 5 years, so the majority of the items that I receive I pass along to others. This year I thought I would pass them onto you.

The Giveaway is simple. Just leave a comment below indicating that you would like to receive one, and I will contact you for address details. No bonus ballots for subscribing to the blog (though I would appreciate it) and no bonus ballots for linking to this post or adding me to your blogroll (though I would appreciate that as well).

As it is already February and I want to get these out, the giveaway is first come first serve. Feel free to indicate if you have a preferred prize. In total I have 12 items to give away. None of the companies are sponsoring this… it is merely that one or more of my students have a connection to the company in question.

They are (items crossed off have been claimed):

1. A desk planner from BNP Paribus (European Bank) featuring daily planning from 7 a.m. to 9 p.m., some memo space, and a colour atlas in the back!
2. A standing desk calendar from Otowa Electric Co. featuring beautiful colour photos of lightning.
3. Two simple monthly desk calendars from Oracle Japan.
4. A pocket schedule from Yuasa Tech Engineering Co., with a simple monthly design, memo pages and an address book.
5. A pocket schedule from Kokusai AM (Japanese fund company) featuring monthly and daily scheduling space.
6. A simple daily schedule from Mitsubishi Technos (machinery and equipment) featuring graph paper and address book. Japanese national holidays are written in English as well!
7. A yearly and daily pocket schedule from Kajima Corporation (construction company).
8. A yearly and daily pocket  schedule from Singapore Airlines featuring an index of all national holidays in the world!
9. A monthly and daily pocket schedule from Mitsubishi UFJ (Japanese bank) including memo paper.
10. A yearly and small daily schedule from BNP Paribas (European bank) including large memo area and address book.
11. A monthly and daily pocket schedule from JR Kyushu (Japanese rail company) with memo pages, address book, and a map of the train routes of Kyushu!! (This is the schedule I’ve been using every year since 2007. I love the layout)

Remember, the majority of these items are in Japanese, but what a great conversation starter!!! Imagine whipping out your Kokusai AM schedule to set up a meeting, and your counterpart says “Where’s THAT schedule from?” Or imagine when someone sees the amazing photos of lightning from Otawa Electric on your desk, and you can say “Oh, yes. Quite nice, isn’t it. An acquaintance from Japan sent it to me.”

If it sounds like I’m touting the benefits, it’s because I am… I have a newborn, and need all the space I can get.

One of the most interesting parts of out talk was learning about the various areas where the International Trade Office helps Canada. To be honest, before meeting with the Trade Commissioner, I thought their main role was helping to bring smoked salmon and Blackberries abroad (only half-joking). In fact, there are 5 main areas that the combined Departments of Foreign Affairs and International Trade operates. The last two categories, unfortunately, we didn’t get into great detail about.

Environment, Bioengineering, and Energy

As mentioned in part III, there are several foreign companies investing in the energy sector in Canada. This ranges from solar and wind farms to the oil sands.

The environment and sustainable energy is a focus, however, and the Department of International Trade is involved with endeavours like Globe Vancouver, a trade show and conference (dubbed “the Davos of Sustainability”) dealing with the link between business and the environment.

Agriculture and Food

Because it is less noticeable than a shiny Blackberry or a towering wind turbine, agri-food is sometimes forgotten, but it is a major component of international trade.

Regulation is important, and the exchange rate is a large variable. Because of the strong yen recently, Japan has increased its purchases of Canadian commodities like grain and canola oil.

Other large players in this category are seafood, meats, maple syrup, ice wine, and though some readers may not like to know this, horse meat to Japan, where it is a delicacy. (Don’t knock it till you try it!)

High Tech, ICT, and Medical

Information and communications technology (ICT) is a large component of the trade between Canada and other countries, and RIM is only a small part of the pie.

Within ICT, Canada and Japan have worked together on Intelligent Transportation Systems (ITS). This is technology using Middleware to link smart cars and smart roads. These systems are being designed to help with fuel efficiency, and can reduce traffic accidents and congestion.

Companies like Bombardier, Bell Helicopter, and Toyota also fit into this category, as the aerospace and automotive industries are large links between Canada and Japan. The cities of Hiroshima and Montreal, for example, are trying to deepen bilateral ties.

Building and Consumer Products

Canada is considered and advanced housing materials provider, exporting both unprocessed and cut lumber, insulation, flooring, and pre-fabricated components such as cabinets, doors and kitchens.

General Economy and Culture

All the other odds and ends of trade, as well as the areas that fall under the jurisdiction of the Department of Foreign Affairs.

Through these 5 categories the Department of International Trade plays a major role in connecting Canadian businesses to the world.

Closing Thoughts

Unlike visiting the Canadian Embassy (which is like a fortress to gain access to) I found the Office of the International Trade Commissioner to be very open, and inviting. When I first walked into the reception area of the office, they were surprised (I hadn’t called in advance), but extremely friendly and excited about the idea of this article series. After a brief description of what I proposed to do, the Trade Commissioner quickly opened his schedule and we came up with some possible times to have our discussion. He emailed me personally that night with some requests to avoid red-tape (If I were to use his name or give the specific location of his office, this process would have had to go through official channels). We met a few days later.

My talk with the Trade Commissioner was a lively and informative talk. It moved through many topics and geographic locations. He is young, energetic, and has a genuine desire to have Canadian businesses succeed in Japan.

I would encourage anyone interested in International Trade to contact their local Trade Office to see if an informal chat could be set up. From my experience, they are more than willing to help educate at the grass-roots level.

My last post dealt with Canadian export to foreign countries, but the Department of International Trade is also very much involved with Foreign investment in Canada. In the case of Japanese investment in Canada, a good and widely known example can be found in the Toyota plant in Cambridge Ontario.

Here we have the reverse of the trade route. Toyota executives made contact through a Trade Office located in Japan. The Trade Office then contacted officials in Canada as well as at many Regional Offices in Canada. Eventually an agreement was made to create Toyota’s first plant in Canada.

The inflow to the Canadian economy didn’t stop with the creation of the plant. In order to have the factory (which produces the Lexus brand) run smoothly, several executives from the Kyushu plant in Japan were relocated to Southern Ontario. The Kyushu plant produces Harriers, which is a high-end model of car. These executives and engineers moved to Ontario to provide expertise and guidance.

Considering everything, there are actually several layers of investment and participation in the Canadian economy with such a venture. Construction companies were contracted to build the plant, workers hired, materials and resources purchased, parts manufacturers contracted, and taxes paid. There is also another effect, albeit small, which is the result of all the Japanese executives and their families moving to Ontario; these 50 or so families need to rent homes, buy food and other products, and pay taxes.

Another situation of Japanese companies investing in Canada has been in the renewable energy sector. Over the past several years, Japanese companies have been investing in the Canadian solar industry, either through investment in Canadian companies, or by setting up their own solar farms and stations.

A recent rule on wind power in Ontario has caused a trade row between Japan and Canada, as the Japanese companies say that the support for wind power creates a trade barrier for them, and is especially painful because the ruling came after their large investment in the province.

The dispute is unresolved as of yet.

The next article in this series will talk about the five specific areas that the Trade Office deals with, as well as some examples within each sector. They very much overlap with my last post and this, and will hopefully give some further clarification into how deeply intertwined countries and countries are. Toyotas and Blackberries are only the suface.

There are several ways in which the Department of International Trade can help Canadian companies and the Canadian economy. While Japanese export to Canada is not a focus, the Trade Office does deal with it a lot because of Japanese companies coming to them for that reason. Their main mandates, however, fall under the goals of Canadian export to Japan, and Japanese investment in Canada (or the country of said Trade Office).

In the case of a Canadian company wanting to sell its product or service abroad, they would first go to their regional trade office. While we did not get into the specific details, we did talk in general terms, and Research in Motion came up, so let’s use them as an example.

Research in Motion would go to a regional Trade Office (say in the Kitchener-Waterloo area) and state their desire to sell Blackberries in Japan. They would register with the Trade Office to gain access to the database of market research. The regional office would contact the office in Japan and pass on any important information to them. From that point onward, RIM would be in direct contact with the Trade Office in Japan.

The Trade Office would then introduce RIM to the big cell phone players in Japan, and it would then be up to RIM to decide which provider is best suited for their needs. As Blackberries are only available on the DoCoMo network, we can guess what their decision was.

Another route for Canadian companies to gain access to a foreign market is through trade fairs. This may be as simple as setting up a booth at a foreign fair (think Bombardier sending planes and staff to the Dubai Air Show to gain orders) or in the case of at lease one Canadian company, being more proactive and setting up something yourself.

Clearwater Seafood of Canada, for example, was very proactive in Japan. In July of this year they sponsored the “Homard Festa,” in which they teamed up with about 80 restaurants in Fukuoka Prefecture, to highlight Atlantic seafood for the entire month.

The Trade Commissioner and I didn’t talk about the results of this endeavour (as it was only a couple of months ago, so not enough data is in) but my assumption would be that if a restaurant experienced consumer satisfaction resulting from the Atlantic seafood, they may add it to their permanent menu, in which case they would continually import from Clearwater.

In both of the above examples, we have situations where Canadian companies have made efforts to sell their products abroad. Of course, it is not always that direction. Sometimes foreign companies want to invest in the Canadian economy.

And we will deal with that in the next post: specifically, Japanese companies wishing to invest in Canada’s infrastructure.

Walking into the office of the Canadian Trade Commissioner, I am met with memories of home: maps of Canada and the individual provinces line the walls, a small Canadian flag sits on the cabinet by the entrance, about 20 bottles of Canadian wine and maple syrup are on display, and the assistant to the Trade Commissioner (who doubles as receptionist) ends her sentences with eh.

I’m thrown for a little bit of a loop, however, as I quickly realize that all three of the people who staff the small office (The Commissioner of International Trade, The Commissioner of Foreign Affairs, and their assistant) are Japanese citizens. Through my talk with the Trade Commissioner, however (whose Blackberry sat on the table throughout our interview) I found out that there are two types of employees working at Canadian offices abroad.

The Canadian Basis Staff (CBS) are Canadian citizens and are brought over from Canada. CBS make up the various Ambassadors and Diplomats that act on behalf of Canada abroad.  Locally Engaged Staff (LES) also represent Canada, but are hired by the Canadian government in the foreign country.

What I found interesting from this is that while LES are mostly citizens of the foreign country in question, anyone could become a LES. A Canadian citizen in China, for example, could be hired as a LES if he or she spoke Chinese at a native level. In practice, however, LES are almost always citizens of the host country, as not only language ability, but also a deep understanding of the local culture is very important when dealing with international trade.

The Trade Office works under the Canadian government and Embassy as “The Department of Foreign Affairs and International Trade,” which is a merger of the two departments. The International Trade department is further broken down into two components: Regional Offices located in Canada, and Foreign Located Offices located abroad; the two offices work closely together.

The main function of the International Trade Department is to give assistance to Canadian companies in establishing links abroad. A company wanting to sell its product or service abroad would first go to the regional office in Canada. After determining certain criteria, the regional office contacts the foreign located office, which then offers further and more specific advice to the company.

During this process, the company would register with the Trade Office to gain access to a government database of local market data where they could research market reports, gain more understanding of a region’s area and market timing, as well as see lists of trade shows in the area.

The government and Trade Office provide this service free of charge. They can help regarding advice on local logistics or to introduce interpreters, but they do not act as mediators or agents, and are not involved with any ensuing negotiation. Most importantly, they can introduce Canadian business people to Japanese counterparts through Embassy sponsored events. It is these introductions and networking opportunities that are the seeds of international trade.

Part II of this series will deal with some of the company to company, as well as country to country, connections that can occur.

A Completely Fictional Chart

In possibly related news, here’s what Canada’s GDP numbers looked like for September. Looks like productivity went through the roof around the 22nd and 23rd. Wonder why?

(The Facebook downtime to GDP chart is a creation of ISO Salt Corp. and is in not to be used as fact.)

On to some interesting things I came across this past week:

Blogs

• Mike Holman of Money Smarts has written a book on RESPs. I’ve ordered 5 copies from Amazon already (4 gifts and one for me). So check out his post and swing over to Amazon to pick up a copy if you, or someone you know, have kids.
• Larry MacDonald has a good little list of some scholarly papers on investing. I liked the asymmetrical investing paper. I don’t really have to worry about it too much, as Japanese Boards of Education don’t issue stock, but something to think about for the future.
• Canadian Capitalist writes a review of ”Pensionize Your Nest Egg,” saying that it is well written and easy to understand.
• Andrew Hallam points out that Canadian schools are starting to teach the truth about actively managed funds… the banks are not impressed, it seems.
• Invest it Wisely featured a guest post entitled “If you enjoy financial obligations, don’t read this.” I didn’t read it for a while as I was trying to decide what a financial obligation is, but I finally did, and it’s about re-financing a mortgage at a shorter term.
• Balance Junkie says investing in the stock market is like crossing the street: you should pay attention to the cars more than if the little guy is says walk or don’t walk.

Articles

• Bad news for Bombardier and Canada; Japan’s Mitsubishi Heavy looks to have its own regional jet in the air by 2012.
• Investing Thesis has a great article on household debt. Some very shocking numbers there.
• Since the F/X intervention didn’t do too much to the yen, the BOJ has now lowered interest rates to effectively 0%. More reason to keep my cash flowing abroad.
• I heard about this first on the Wall Street Journal This Morning, but BankNerd has an article about the credit cards we may be carrying in the future.
• The TMX Group announced their intent to launch a new ATS called TMX Select. I can only assume this is their answer to losing market share to the Alpha platform. The question remains, when will the supposed price battle of the exchanges be passed onto the retail investor? I think I’ll keep holding my breath for cold fusion over that one.

Carnivals

• The Canadian Personal Finance and Investing Carnival, hosted by Investing Thesis,  included my article on Scholarships, Bursaries and Used Books. There are many good articles in the list.
• Rachelle at Landlord Rescue has started the Canadian  Real Estate Carnaval. There are a lot of articles to browse through.

Having a number that is broken down and comprehensible is very important to me. I could look at receipts and see that we had, say, $2000 worth of expenses last month, but unless I break that down into categories, it is somewhat meaningless to me. Without categories, I would be lost as to where our money is going.

I feel the same lack of understanding when talking to family or friends from Canada who talk about their fuel consumption. They tell me numbers, yet I have no idea what those numbers mean in real terms.

I first became aware of this difference when I was talking to my father a couple of year ago. He asked me how my car was on gas and I told him I get about 15 km to the litre. He was surprised, saying that wasn’t very good. I was surprised that he would say that for such a fuel-efficient car (which was 10 years old, to boot!). We quickly realized that we were talking in different languages. My father’s brain had taken my kilometres per litre and input it into a Canadian calculation of litres per 100 km. To him, my 15km/litre sounded like 15 litres/100km.

Fair enough. Two countries, two ways of calculating fuel consumption. If it was that easy I wouldn’t have a problem. But my question is, can someone who thinks about litres per 100 km really understand their fuel usage?

To be precise, I average 15.1 km/litre from September to June (July and August is all over the board and depends on my A/C usage). Knowing that, I find it very easy to ball-park my cost for going from A to B. For example, I live 7.4 km from job 1, and 8.2 km from job 2.  A round trip to and from job 1 costs me pretty much one litre of gas; a round trip to and from job 2 costs me just over one litre. In my monetary terms, that means that for each job, I am paying roughly 120 yen ($1.50) for my transportation.

Reversing the calculation for the standard Canadian way (here is a good post on how to do it), I can see that I use 6.6 litres per 100 km of driving. But that number doesn’t really help me out when trying to figure out the cost of a trip to the downtown core 4 km away. Maybe it’s just getting used to the number and mental calculation, but for me, kilometres per litre is a more digestible and practical number.